Trade Openness and Environmental Policy Stringency: Quantile Evidence

Dong-Hyeon Kim and Shu-Chin Lin
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Dong-Hyeon Kim: Department of Food and Resource Economics, Korea University, Seoul 136-701, Korea
Shu-Chin Lin: Department of Global Economics, Sungkyunkwan University, Seoul 110-745, Korea

Sustainability, 2022, vol. 14, issue 6, 1-15

Abstract: The intensively debated issue of whether trade globalization leads to a race (climb) to the bottom (top) such that environmental policy stringency is loosened (strengthened) is still far from being uncontroversial. This paper provides new empirical evidence from the standpoint of the North (advanced) countries using both the generalized methods of moment (GMM) and GMM quantile estimators for dynamic panel data models. It first investigates the importance of trade partners and finds, in a sample of OECD countries, that increased trade with the South (developing) countries leads to more stringent environmental regulation whereas heightened trade with the North eases environmental regulation. It then examines whether there exist differences across regimes with different extents of stringency in environmental regulation and finds significant regime-specific effects. Specifically, liberalizing trade with the North weakens environmental regulation stringency in a regime with medium stringency but reinforces it in a regime with high and low stringency. Conversely, expanded trade with the South raises environmental regulation stringency in a regime with medium stringency but deteriorates it in a regime with high and low stringency.

Keywords: trade; environmental policy stringency; quantile effect (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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